Civeo Corp 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis together with our consolidated financial statements and the notes to those statements included elsewhere in this quarterly report on Form 10-Q. Reverse Share Split On November 19, 2020, we effected a reverse share split where each twelve issued and outstanding common shares were converted into one common share (Reverse Share Split). Our common shares began trading on a reverse share split adjusted basis on November 19, 2020. All common share and per common share data included in this quarterly report have been retroactively adjusted to reflect the Reverse Share Split. See Note 1 - Description of Business and Basis of Presentation to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion. Overview and Macroeconomic Environment We provide hospitality services to the natural resources industry in Canada, Australia and the U.S. Demand for our services can be attributed to two phases of our customers’ projects: (1) the development or construction phase; and (2) the operations or production phase. Historically, initial demand for our hospitality services has been driven by our customers’ capital spending programs related to the construction and development of natural resource projects and associated infrastructure, as well as the exploration for oil and natural gas. Long-term demand for our services has been driven by natural resource production, maintenance and operation of those facilities as well as expansion of those sites. In general, industry capital spending programs are based on the outlook for commodity prices, economic growth, global commodity supply/demand dynamics and estimates of resource production. As a result, demand for our hospitality services is largely sensitive to expected commodity prices, principally related to oil, metallurgical (met) coal, liquefied natural gas (LNG) and iron ore. Other factors that can affect our business and financial results include the general global economic environment and regulatory changes in 19 Canada, Australia, the U.S. and other markets, including governmental measures introduced to fight climate change or to help slow the spread or mitigate the impact of COVID-19. Our business is predominantly located in northern Alberta, Canada; British Columbia, Canada; Queensland, Australia; and Western Australia. We derive most of our business from natural resource companies who are developing and producing oil sands, met coal, LNG and iron ore resources and, to a lesser extent, other hydrocarbon and mineral resources. Approximately 67% of our revenue is generated by our lodges in Canada and our villages in Australia. Where traditional accommodations and infrastructure are insufficient, inaccessible or cost ineffective, our lodge and village facilities provide comprehensive hospitality services similar to those found in an urban hotel. We typically contract our facilities to our customers on a fee-per-person-per- day basis that covers lodging and meals and is based on the duration of customer needs, which can range from several weeks to several years. The remainder of our revenue is generated by our hospitality services at customer-owned locations in Canada and Australia, mobile assets in Canada and the U.S and our lodges in the U.S. Generally, our core Canadian oil sands and Australian mining customers make significant capital investments to develop their prospects, which have estimated reserve lives ranging from ten years to in excess of 30 years. Consequently, these investments are primarily dependent on those customers’ long-term views of commodity demand and prices. The spread of COVID-19 and the response thereto have negatively impacted the global economy. The actions taken by governments and the private-sector to mitigate the spread of COVID-19 and the risk of infection, including government-imposed or voluntary social distancing and quarantining, reduced travel and remote work policies, have evolved with the introduction of vaccination efforts, and may continue to evolve as the surfacing of virus variants has added a degree of uncertainty to the continuing global impact of COVID-19. Additionally, global oil prices dropped to historically low levels in March and April 2020 due to severely reduced global oil demand, high global crude inventory levels, uncertainty around timing and slope of worldwide economic recovery after COVID-19 related economic shut-downs and effectiveness of production cuts by major oil producing countries, such as Saudi Arabia, Russia and the U.S. In mid-April 2020, OPEC+ (the combination of historical OPEC members and other significant oil producers, such as Russia) announced production cuts of up to approximately 10 million barrels per day. However, oil prices remained at depressed levels throughout most of 2020, before modest improvement late in the year and into early 2021. As global oil demand recovered in the second quarter of 2021, oil supply did not keep up, resulting in falling inventories and a significant increase in oil prices continuing into July 2021. In July 2021, OPEC+ agreed to phase out 5.8 million barrels per day of oil production cuts by September 2022. We continue to closely monitor the COVID-19 situation and have taken measures to help ensure the health and well-being of our employees, guests and contractors, including screening of individuals that enter our facilities, social distancing practices, enhanced cleaning and deep sanitization, the suspension of nonessential employee travel and implementation of work-from-home policies, where applicable. Alberta, Canada. In Canada, Western Canadian Select (WCS) crude is the benchmark price for our oil sands customers. Pricing for WCS is driven by several factors, including the underlying price for West Texas Intermediate (WTI) crude, the availability of transportation infrastructure (consisting of pipelines and crude by railcar) and governmental regulation. Historically, WCS has traded at a discount to WTI, creating a “WCS Differential,” due to transportation costs and capacity restrictions to move Canadian heavy oil production to refineries, primarily along the U.S. Gulf Coast. The WCS Differential has varied depending on the extent of transportation capacity availability. Certain expansionary oil pipeline projects have the potential to both drive incremental demand for mobile assets and to improve take-away capacity for Canadian oil sands producers over the longer term. While these pipeline projects, including the Trans Mountain Pipeline (TMX), have recently received incremental regulatory approvals, it is still not certain if any of the proposed pipeline projects will ultimately be completed. Certain segments of the TMX pipeline have resumed construction without conflict at the present time. Recent legal issues with the Canadian government and First Nation groups have been resolved for the time being. The Canadian federal government acquired the TMX pipeline in 2018, approved the expansion of the project and is currently working through a revised construction timeline to adjust for recent delays related to legal hurdles and the COVID-19 pandemic. WCS prices in the second quarter of 2021 averaged $53.27 per barrel compared to $19.73 in the second quarter of 2020. The WCS Differential decreased from $15.35 per barrel at the end of the fourth quarter of 2020 to $13.95 at the end of the second quarter of 2021. In 2018, the Government of Alberta announced it would mandate temporary curtailments of the province’s oil production. However, monthly production limits were put on hold in December 2020 until further notice, allowing operators to produce freely at their discretion while the government monitors production and inventory levels. Should 20 forecasts show storage inventories approaching maximum capacity, the government may reintroduce production limits. As of July 26, 2021, the WTI price was $71.91 and the WCS price was $58.27, resulting in a WCS Differential of $13.64. Together with the initial spread of COVID-19, the depressed price levels of both WTI and WCS materially impacted 2020 maintenance and production spending and activity by Canadian operators and, therefore, demand for our hospitality services. Customers began increasing production activity in the fourth quarter of 2020 and into the first half of 2021. Continued uncertainty, including about the impact of COVID-19, and commodity price volatility and regulatory complications could cause our Canadian oil sands and pipeline customers to reduce production, delay expansionary and maintenance spending and defer additional investments in their oil sands assets. Additionally, if oil prices do not stabilize, the resulting impact could continue to negatively affect the value of our long-lived assets. British Columbia, Canada. Our Sitka Lodge supports the LNG Canada project and related pipeline projects (see discussion below). From a macroeconomic standpoint, LNG demand continued to grow despite the COVID-19 pandemic, reinforcing the need for the global LNG industry to expand access to natural gas. Evolving government energy policies around the world have amplified support for cleaner energy supply, creating more opportunities for natural gas and LNG. Accordingly, the current view is additional investment in LNG supply will be needed to meet the expected long-term LNG demand growth. Currently, Western Canada does not have any operational LNG export facilities. LNG Canada (LNGC), a joint venture among Shell Canada Energy, an affiliate of Royal Dutch Shell plc (40 percent), and affiliates of PETRONAS, through its wholly-owned entity, North Montney LNG Limited Partnership (25 percent), PetroChina (15 percent), Mitsubishi Corporation (15 percent) and Korea Gas Corporation (5 percent), is currently constructing a liquefaction and export facility in Kitimat, British Columbia (Kitimat LNG Facility). British Columbia LNG activity and related pipeline projects are a material driver of activity for our Sitka Lodge, as well as for our mobile assets, which are contracted to serve several portions of the related pipeline construction activity. The actual timing of when revenue is realized from the Coastal Gas Link pipeline and Sitka Lodge contracts could be impacted by any delays in the construction of the Kitimat LNG Facility or the pipeline, such as protest blockades and the COVID-19 pandemic. In late March 2020, LNGC announced steps being taken to reduce the spread of COVID-19, including reduction of the workforce at the project site to essential personnel only. This resulted in a reduction in occupancy at our Sitka Lodge during the second quarter of 2020, before returning to expected levels in the second half of 2020. In late December 2020, British Columbia’s public health officer issued a health order limiting workforce size at all large industrial projects across the province, including LNGC. This order once again reduced occupancy at our Sitka Lodge in the first quarter of 2021. In the second quarter of 2021, this order was repealed. It was replaced with less restrictive requirements focused on monitoring, allowing workforces to return to their optimal sizes. Australia. In Australia, 82% of our rooms are located in the Bowen Basin of Queensland, Australia and primarily serve met coal mines in that region. Met coal pricing and production growth in the Bowen Basin region is predominantly influenced by the levels of global steel production, which increased by 14.4% during the first half of 2021 compared to the same period of 2020. As of July 26, 2021, met coal spot prices were $215 per metric tonne. Long-term demand for steel is expected to be driven by global infrastructure spending and increased steel consumption per capita in developing economies, such as China and India, whose current consumption per capita is a fraction of developed countries. In 2020, the impact of the outbreak of COVID-19 led to a high level of uncertainty for demand of iron ore and met coal. However, due to strong global steel demand, supply disruptions in other countries and limited COVID-19 cases in Australia, Australian met coal and iron ore activity was relatively buoyant in 2020 and the first half of 2021. An increase in global infrastructure spending to stimulate economies is expected to support demand for raw materials, particularly met coal and iron ore. Currently, China and Australia are in a trade dispute that has led to China implementing a trade embargo on Australian coal. China has historically accounted for approximately 22% of Australia’s met coal exports. The continuing uncertainty in the Chinese demand for Australian met coal has led to volatile Australian met coal spot pricing. The Chinese trade embargo and volatile Australian met coal spot pricing have created a shuffling of global export trade flows. If this dispute continues, it could continue to impact pricing volatility, and demand for Australian met coal and consequently lead to reduced occupancy at our Australian villages. Civeo's activity in Western Australia is driven primarily by iron ore production, which is a key steel-making ingredient. As of July 26, 2021, iron ore spot prices were $197.30 per metric tonne. Our integrated services business provides catering and managed services to the mining industry in Western Australia. We have contracts to manage customer-owned villages in Western Australia which primarily support iron ore mines in addition to 21 gold, lithium and nickel mines. We believe iron ore prices are currently at a level that may contribute to increased activity over the long term if our customers view these price levels as sustainable. U.S. Our U.S. business supports oil shale drilling and completion activity and is primarily tied to WTI oil prices in the U.S. shale formations in the Permian Basin, the Mid-Continent, the Bakken and the Rockies. During 2019, the U.S. oil rig count and associated completion activity decreased due to the oil price decline in late 2018 and early 2019 coupled with other market dynamics negatively impacting exploration and production (E&P) spending, finishing the year at 677 rigs. In 2020, the U.S. oil rig count and associated completion activity further decreased due to the global oil price decline discussed above. Only 267 oil rigs were active at the end of 2020. As oil prices began to recover in 2021, oil rig count and drilling activity recovered somewhat, with 372 oil rigs active at the end of the second quarter 2021. The Permian Basin remains the most active U.S. unconventional play, representing 63% of the oil rigs active in the U.S. at the end of the second quarter of 2021. The lower U.S. rig count and decline in oil prices resulted in decreased U.S. oil production from an average of 12.2 million barrels per day in 2019 to an average of 11.3 million barrels per day in 2020 and to an average of 11.2 million barrels per day through the first five months of 2021. As of July 23, 2021, there were 387 active oil rigs in the U.S. (as measured by Bakerhughes.com). With the recent volatility in oil prices and a resulting reduction in spending by E&P companies, we exited the Bakken and reduced our presence in the Rockies regions for our U.S. mobile assets. Those assets were either sold or transported to our Permian Basin and Mid-Continent district locations. This process is underway and we expect it to be complete during the third quarter of 2021. U.S. oil shale drilling and completion activity will continue to be dependent on sustained higher WTI oil prices, pipeline capacity and sufficient capital to support E&P drilling and completion plans. In addition, consolidation among our E&P customer base in the U.S. has historically created short-term spending and activity dislocations. Should the current trend of industry consolidation continue, we may see activity, utilization and occupancy declines in the near term. Recent Commodity Prices. Recent WTI crude, WCS crude, met coal and iron ore pricing trends are as follows: Average Price (1) Quarter ended WTI Crude (per bbl) WCS Crude (per bbl) Hard Coking Coal (Met Coal) (per tonne) Iron Ore (per tonne) Third Quarter through July 26, 2021 $ 72.35 $ 58.77 $ 207.69 $ 209.68 6/30/2021 66.19 53.27 136.44 195.97 3/31/2021 58.13 46.28 127.95 159.83 12/31/2020 42.63 31.34 109.37 128.24 9/30/2020 40.90 31.15 113.30 116.10 6/30/2020 27.95 19.73 120.27 89.53 3/31/2020 45.38 27.92 156.17 83.57 12/30/2019 56.85 37.94 141.39 85.13 9/30/2019 56.40 43.88 160.25 101.41 6/30/2019 59.89 47.39 204.78 94.62 3/31/2019 54.87 44.49 203.30 79.26 12/31/2018 59.32 25.66 223.02 70.13 9/30/2018 69.61 41.58 188.46 61.91 6/30/2018 67.97 49.93 189.41 62.58 (1) Source: WTI crude prices are from U.S. Energy Information Administration (EIA), WCS crude prices and iron ore prices are from Bloomberg and hard coking coal prices are from IHS Markit. Foreign Currency Exchange Rates. Exchange rates between the U.S. dollar and each of the Canadian dollar and the Australian dollar influence our U.S. dollar reported financial results. Our business has historically derived the vast majority of its revenues and operating income (loss) in Canada and Australia. These revenues and profits/losses are translated into U.S. dollars for U.S. GAAP financial reporting purposes. The following tables summarize the fluctuations in the exchange rates between the U.S. dollar and each of the Canadian dollar and the Australian dollar: 22 Three Months Ended June 30, Six Months Ended June 30, 2021 2020 Change Percentage 2021 2020 Change Percentage Average Canadian dollar to U.S. dollar $0.815 $0.722 0.09 12.8% $0.802 $0.733 $0.07 9.4% Average Australian dollar to U.S. dollar $0.770 $0.658 0.11 17.2% $0.772 $0.658 $0.11 17.3% As of June 30, 2021 December 31, 2020 Change Percentage Canadian dollar to U.S. dollar $0.807 $0.785 0.02 2.8% Australian dollar to U.S. dollar $0.750 $0.773 (0.02) (3.0)% These fluctuations of the Canadian and Australian dollars have had and will continue to have an impact on the translation of earnings generated from our Canadian and Australian subsidiaries and, therefore, our financial results. Capital Expenditures. We continue to monitor the COVID-19 global pandemic and the responses thereto, the global economy, the price of and demand for crude oil, met coal, LNG and iron ore and the resultant impact on the capital spending plans of our customers in order to plan our business activities. We currently expect that our 2021 capital expenditures, exclusive of any business acquisitions, will total approximately $20 million, compared to 2020 capital expenditures of $10.1 million. We may adjust our capital expenditure plans in the future as we continue to monitor customer activity and the impact of COVID-19. See “Liquidity and Capital Resources ” below for further discussion of 2021 capital expenditures. 23 Results of Operations Unless otherwise indicated, discussion of results for the three months ended June 30, 2021, is based on a comparison to the corresponding period of 2020. Results of Operations – Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 Three Months Ended June 30, 2021 2020 Change ($ in thousands) Revenues Canada $ 83,281 $ 52,986 $ 30,295 Australia 64,019 57,071 6,948 U.S. and other 6,876 4,645 2,231 Total revenues 154,176 114,702 39,474 Costs and expenses Cost of sales and services Canada 57,342 42,465 14,877 Australia 44,895 34,913 9,982 U.S. and other 5,765 5,755 10 Total cost of sales and services 108,002 83,133 24,869 Selling, general and administrative expenses 14,703 11,490 3,213 Depreciation and amortization expense 21,377 22,205 (828) Impairment expense 7,935 — 7,935 Other operating expense (income) 30 (285) 315 Total costs and expenses 152,047 116,543 35,504 Operating income (loss) 2,129 (1,841) 3,970 Interest expense, net (3,399) (3,850) 451 Other income 788 12,642 (11,854) (Loss) income before income taxes (482) 6,951 (7,433) Income tax benefit (expense) 492 (122) 614 Net income 10 6,829 (6,819) Less: Net income attributable to noncontrolling interest (3) 222 (225) Net income attributable to Civeo Corporation 13 6,607 (6,594) Less: Dividends attributable to preferred shares 480 471 9 Net (loss) income attributable to Civeo common shareholders $ (467) $ 6,136 $ (6,603) We reported net loss attributable to Civeo for the quarter ended June 30, 2021 of $0.5 million, or $0.03 per diluted share. As further discussed below, net loss included a $7.9 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense. We reported net income attributable to Civeo for the quarter ended June 30, 2020 of $6.1 million, or $0.37 per diluted share. As further discussed below, net income included $4.7 million of income associated with the settlement of a representations and warranties claim related to the Noralta acquisition included in Other income. Revenues. Consolidated revenues increased $39.5 million, or 34%, in the second quarter of 2021 compared to the second quarter of 2020. This increase was primarily due to (i) higher billed rooms at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from a pipeline project in Canada, (iii) increased occupancy at our Australian integrated services villages, (iv) increased activity levels in certain U.S. markets and (v) a stronger Australian and Canadian dollar relative to the U.S. dollar in the second quarter of 2021 compared to the second quarter of 2020. These items were partially offset by (i) reduced occupancy at our Canadian Sitka Lodge related to the COVID-19 pandemic and the British Columbia health order, (ii) reduced food service activity, as an overflow site supporting a LNG-related project in 2020 is no longer required, (iii) decreased activity at our Bowen Basin villages and Western Australia villages and (iv) decreased activity at our U.S. wellsite business. See the discussion of segment results of operations below for further information. 24 Cost of Sales and Services. Our consolidated cost of sales and services increased $24.9 million, or 30%, in the second quarter of 2021 compared to the second quarter of 2020. This increase was primarily due to (i) increased occupancy at our Canadian oil sands lodges related to turnaround activities by a number of customers, (ii) increased mobile asset activity from a pipeline project in Canada, (iii) increased occupancy at our Australian integrated services villages and increased cost of temporary labor due to ongoing labor shortages in Australia, (iv) increased activity levels in certain U.S. markets and (v) a stronger Australian and Canadian dollar relative to the U.S. dollar in the second quarter of 2021 compared to the second quarter of 2020. These items were partially offset by (i) reduced occupancy at our Canadian Sitka Lodge related to the COVID-19 pandemic and the British Columbia health order, (ii) reduced food service activity, as an overflow site supporting a LNG-related project in 2020 is no longer required, (iii) decreased activity at our Bowen Basin villages and Western Australia villages and (iv) decreased activity at our U.S. wellsite business. See the discussion of segment results of operations below for further information. Selling, General and Administrative Expenses. SG&A expense increased $3.2 million, or 28%, in the second quarter of 2021 compared to the second quarter of 2020. This increase was primarily due to higher incentive compensation costs, share-based compensation expense and compensation expense. In addition, SG&A expense increased approximately $1.0 million due to a stronger Australian and Canadian dollar relative to the U.S. dollar in the second quarter of 2021 compared to the second quarter of 2020. The increase in share-based compensation was due to an increase in our stock price during the second quarter of 2021 compared to the second quarter of 2020. Depreciation and Amortization Expense. Depreciation and amortization expense decreased $0.8 million, or 4%, in the second quarter of 2021 compared to the second quarter of 2020. The decrease was primarily due to certain assets and intangibles becoming fully depreciated during 2020 and the extension of the remaining life of certain long-lived assets in the U.S. during the second quarter of 2020. These items were partially offset by a stronger Australian and Canadian dollar relative to the U.S. dollar in the second quarter of 2021 compared to the second quarter of 2020. Impairment Expense. We recorded pre-tax impairment expense of $7.9 million in the second quarter of 2021 associated with long-lived assets in our Australian reporting unit. See Note 6 - Impairment Charges to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion. Operating Income (Loss). Consolidated operating income increased $4.0 million, or 216%, in the second quarter of 2021 compared to the second quarter of 2020, primarily due to increased activity levels in Canada, partially offset by higher impairment expense. Interest Expense, net. Net interest expense decreased by $0.5 million, or 12%, in the second quarter of 2021 compared to the second quarter of 2020, primarily related to lower average debt levels and lower interest rates on term loan and revolving credit facility borrowings during 2021 compared to 2020. Other Income. Consolidated other income decreased $11.9 million in the second quarter of 2021 compared to the second quarter of 2020. The second quarter of 2021 included $0.7 million related to proceeds from the Canada Emergency Wage Subsidy (CEWS). The second quarter of 2020 included $4.7 million of other income associated with the settlement of a representations and warranties claim related to the Noralta acquisition, $6.2 million of other income related to proceeds from the CEWS and a higher gain on sale of assets compared to the second quarter of 2020. Income Tax (Expense) Benefit. Our income tax benefit for the three months ended June 30, 2021 totaled $0.5 million, or 102.1% of pretax loss, compared to an income tax expense of $0.1 million, or 1.8% of pretax income, for the three months ended June 30, 2020. Our effective tax rate for both the three months ended June 30, 2021 and June 30, 2020 was impacted by considering Canada and the U.S. loss jurisdictions that were removed from the annual effective tax rate computation for purposes of computing the interim tax provision. Under ASC 740-270, "Accounting for Income Taxes," the quarterly tax provision is based on our current estimate of the annual effective tax rate less the prior quarter's year-to-date provision. Other Comprehensive (Loss) Income. Other comprehensive income decreased $31.0 million in the second quarter of 2021 compared to the second quarter of 2020, primarily as a result of foreign currency translation adjustments due to changes in the Canadian and Australian dollar exchange rates compared to the U.S. dollar. The Canadian dollar exchange rate compared to the U.S. dollar increased 1% in the second quarter of 2021 compared to a 4% decrease in the second quarter of 2020. The Australian dollar exchange rate compared to the U.S. dollar decreased 1% in the second quarter of 2021 compared to a 2% decrease in the second quarter of 2020. 25 Segment Results of Operations – Canadian Segment Three Months Ended June 30, 2021 2020 Change Revenues ($ in thousands) Accommodation revenue (1) $ 69,759 $ 40,204 $ 29,555 Mobile facility rental revenue (2) 8,666 6,072 2,594 Food service and other services revenue (3) 4,856 6,710 (1,854) Total revenues $ 83,281 $ 52,986 $ 30,295 Cost of sales and services ($ in thousands) Accommodation cost $ 44,992 $ 28,598 $ 16,394 Mobile facility rental cost 5,644 5,285 359 Food service and other services cost 4,455 6,163 (1,708) Indirect other costs 2,251 2,419 (168) Total cost of sales and services $ 57,342 $ 42,465 $ 14,877 Gross margin as a % of revenues 31.1 % 19.9 % 11.3 % Average daily rate for lodges (4) $ 96 $ 96 $ — Total billed rooms for lodges (5) 723,324 409,897 313,427 Average Canadian dollar to U.S. dollar $ 0.815 $ 0.722 $ 0.093 (1) Includes revenues related to lodge rooms and hospitality services for owned rooms for the periods presented. (2) Includes revenues related to mobile assets for the periods presented. (3) Includes revenues related to food services, laundry and water and wastewater treatment services for the periods presented. (4) Average daily rate is based on billed rooms and accommodation revenue. (5) Billed rooms represents total billed days for owned assets for the periods presented. Our Canadian segment reported revenues in the second quarter of 2021 that were $30.3 million, or 57%, higher than the second quarter of 2020. The strengthening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 13% in the second quarter of 2021 compared to the second quarter of 2020 resulted in a $9.6 million period-over-period increase in revenues. Excluding the impact of the stronger Canadian exchange rate, the segment experienced a 39% increase in revenues. This increase was driven by higher billed rooms at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from a pipeline project. Partially offsetting these items, revenue was lower at our Sitka Lodge related to the COVID-19 pandemic and the British Columbia health order and from food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required. Our Canadian segment cost of sales and services increased $14.9 million, or 35%, in the second quarter of 2021 compared to the second quarter of 2020. The strengthening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 13% in the second quarter of 2021 compared to the second quarter of 2020 resulted in a $6.5 million period-over-period increase in cost of sales and services. Excluding the impact of the stronger Canadian exchange rate, the increased cost of sales and services was driven by increased occupancy at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from a pipeline project. Partially offsetting these items, cost of sales and services decreased at our Sitka Lodge related to the COVID-19 pandemic and the British Columbia health order and from food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required. Our Canadian segment gross margin as a percentage of revenues increased from 19.9% in the second quarter of 2020 to 31.1% in the second quarter of 2021. This was primarily driven by increased operating efficiencies at our oil sands lodges due to higher occupancy and from our increased mobile asset activity. 26 Segment Results of Operations – Australian Segment Three Months Ended June 30, 2021 2020 Change Revenues ($ in thousands) Accommodation revenue (1) $ 37,780 $ 34,933 $ 2,847 Food service and other services revenue (2) 26,239 $ 22,138 $ 4,101 Total revenues $ 64,019 $ 57,071 $ 6,948 Cost of sales and services ($ in thousands) Accommodation cost $ 18,082 $ 15,269 $ 2,813 Food service and other services cost 25,154 18,759 6,395 Indirect other cost 1,659 885 774 Total cost of sales and services $ 44,895 $ 34,913 $ 9,982 Gross margin as a % of revenues 29.9 % 38.8 % (9.0) % Average daily rate for villages (3) $ 81 $ 70 $ 11 Total billed rooms for villages (4) 466,298 502,392 (36,094) Australian dollar to U.S. dollar $ 0.770 $ 0.658 $ 0.113 (1) Includes revenues related to village rooms and hospitality services for owned rooms for the periods presented. (2) Includes revenues related to food services and other services, including facilities management for the periods presented. (3) Average daily rate is based on billed rooms and accommodation revenue. (4) Billed rooms represent total billed days for owned assets for the periods presented. Our Australian segment reported revenues in the second quarter of 2021 that were $6.9 million, or 12%, higher than the second quarter of 2020. The strengthening of the average exchange rate for Australian dollars relative to the U.S. dollar by 17% in the second quarter of 2021 compared to the second quarter of 2020 resulted in a $9.4 million period-over-period increase in revenues. Accordingly, the increase in the average daily rate is entirely attributable to the strengthening of the Australia dollar. Excluding the impact of the stronger Australian exchange rate, the Australian segment experienced a 4% decrease in revenues largely due to decreased activity at our Bowen Basin villages and Western Australia villages, partially offset by increased occupancy at our integrated services villages. Our Australian segment cost of sales and services increased $10.0 million, or 29%, in the second quarter of 2021 compared to the second quarter of 2020. The strengthening of the average exchange rate for Australian dollars relative to the U.S. dollar by 17% in the second quarter of 2021 compared to the second quarter of 2020 resulted in a $6.6 million period-over-period increase in cost of sales and services. Excluding the impact of the stronger Australian exchange rate, the increase in cost of sales and services was largely driven by the increased occupancy at our integrated services villages and increased costs of temporary labor due to ongoing labor shortages. Our Australian segment gross margin as a percentage of revenues decreased to 29.9% in the second quarter of 2021 from 38.8% in the second quarter of 2020. This was primarily driven by our integrated services business, which has a service-only business model, and therefore results in lower overall gross margins than the accommodation business. Reduced occupancy at the Bowen Basin villages and Western Australia villages has also impacted our Australian gross margin. Segment gross margin has also been negatively impacted by increased staff costs as a result of a hospitality labor shortage in Australia which has been exacerbated by state and international border closures due to COVID-19. State and international border closures have affected the number of staff available which has subsequently led to an increased reliance on more expensive temporary labor hire resources and has placed upward pressure on wages for permanent staff as competitors compete for a small pool of labor. 27 Segment Results of Operations – U.S. Segment Three Months Ended June 30, 2021 2020 Change Revenues ($ in thousands) $ 6,876 $ 4,645 $ 2,231 Cost of sales and services ($ in thousands) $ 5,765 $ 5,755 $ 10 Gross margin as a % of revenues 16.2 % (23.9) % 40.1 % Our U.S. segment reported revenues in the second quarter of 2021 that were $2.2 million, or 48%, higher than the second quarter of 2020. This increase was due to increased occupancy at our West Permian, Killdeer and Acadian Acres lodges and increased activity in our offshore business from fabrication and unit sales, partially offset by reduced U.S. drilling activity affecting our wellsite business. Our U.S. segment cost of sales and services slightly increased in the second quarter of 2021 compared to the second quarter of 2020. This increase was due to greater activity in our offshore business, partially offset by reduced costs in our wellsite business attributable to its reduced activity. Our U.S. segment gross margin as a percentage of revenues increased from (23.9)% in the second quarter of 2020 to 16.2% in the second quarter of 2021 primarily due to increased occupancy at our West Permian, Killdeer and Acadian Acres lodges and in our offshore business from product sales, partially offset by reduced operating efficiencies at lower activity levels in our wellsite business. 28 Results of Operations – Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020 Six Months Ended June 30, 2021 2020 Change ($ in thousands) Revenues Canada $ 145,166 $ 132,334 $ 12,832 Australia 123,656 106,184 17,472 U.S. and other 10,784 14,976 (4,192) Total revenues 279,606 253,494 26,112 Costs and expenses Cost of sales and services Canada 109,227 106,737 2,490 Australia 87,798 64,466 23,332 U.S. and other 10,787 15,243 (4,456) Total cost of sales and services 207,812 186,446 21,366 Selling, general and administrative expenses 28,884 25,427 3,457 Depreciation and amortization expense 42,646 47,707 (5,061) Impairment expense 7,935 144,120 (136,185) Other operating income 101 704 (603) Total costs and expenses 287,378 404,404 (117,026) Operating loss (7,772) (150,910) 143,138 Interest expense, net (6,761) (9,429) 2,668 Other income 5,702 12,667 (6,965) Loss before income taxes (8,831) (147,672) 138,841 Income tax (expense) benefit (584) 8,689 (9,273) Net loss (9,415) (138,983) 129,568 Less: Net income attributable to noncontrolling interest 56 480 (424) Net loss attributable to Civeo Corporation (9,471) (139,463) 129,992 Less: Dividends attributable to preferred shares 958 939 19 Net loss attributable to Civeo common shareholders $ (10,429) $ (140,402) $ 129,973 We reported net loss attributable to Civeo for the six months ended June 30, 2021 of $10.4 million, or $0.73 per diluted share. As further discussed below, net loss included a $7.9 million pre-tax loss resulting from the impairment of fixed assets included in Impairment expense. We reported net loss attributable to Civeo for the six months ended June 30, 2020 of $140.4 million, or $9.96 per diluted share. As further discussed below, net loss included (i) a $93.6 million pre-tax loss resulting from the impairment of goodwill in our Canada segment included in Impairment expense, (ii) a $38.1 million pre-tax loss resulting from the impairment of long-lived assets in our Canada segment included in Impairment expense and (iii) a $12.4 million pre-tax loss resulting from the impairment of long-lived assets in our U.S. segment included in Impairment expense. Net loss was partially offset by $4.7 million of income associated with the settlement of a representations and warranties claim related to the Noralta acquisition included in Other income. Revenues. Consolidated revenues increased $26.1 million, or 10%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. This increase was primarily due to (i) increased mobile asset activity from a pipeline project in Canada, (ii) increased occupancy at our Australian integrated services villages and (iii) a stronger Australian and Canadian dollar relative to the U.S. dollar in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. These items were partially offset by (i) reduced food service activity, as an overflow site supporting a LNG-related project in 2020 is no longer required, (ii) decreased activity at our Bowen Basin villages and Western Australia villages and (iii) decreased activity at our U.S. wellsite business. See the discussion of segment results of operations below for further information. 29 Cost of Sales and Services. Our consolidated cost of sales and services increased $21.4 million million, or 11%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. This increase was primarily due to (i) increased mobile asset activity from a pipeline project in Canada, (ii) increased occupancy at our Australian integrated services villages and increased cost of temporary labor due to ongoing labor shortages in Australia and (iii) a stronger Australian and Canadian dollar relative to the U.S. dollar in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. These items were partially offset by (i) reduced food service activity, as an overflow site supporting a LNG-related project in 2020 is no longer required, (ii) decreased activity at our Bowen Basin villages and Western Australia villages and (iii) lower activity in certain markets in the U.S. See the discussion of segment results of operations below for further information. Selling, General and Administrative Expenses. SG&A expense increased $3.5 million, or 14%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. This increase was primarily due to higher incentive compensation costs, share-based compensation expense and compensation expense, partially offset by lower professional fees. The increase in share-based compensation was due to an increase in our stock price during 2021 compared to 2020. Depreciation and Amortization Expense. Depreciation and amortization expense decreased $5.1 million, or 11%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The decrease was primarily due to (i) certain assets and intangibles becoming fully depreciated during 2020, (ii) the impairment of certain long-lived assets in Canada and the U.S. during the first quarter of 2020 and (iii) the extension of the remaining life of certain long-lived assets in the U.S. during the second quarter of 2020. These items were partially offset by a stronger Australian and Canadian dollar relative to the U.S. dollar in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. Impairment Expense. We recorded pre-tax impairment expense of $7.9 million in the six months ended June 30, 2021 associated with long-lived assets in our Australian reporting unit. Impairment expense of $144.1 million in the six months ended June 30, 2020 included the following items: • Pre-tax impairment expense of $93.6 million related to the impairment of goodwill in our Canadian reporting unit. • Pre-tax impairment expense of $38.1 million associated with long-lived assets in our Canadian reporting unit. • Pre-tax impairment expense of $12.4 million associated with long-lived assets in our U.S. reporting unit. See Note 6 - Impairment Charges to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion. Operating Loss. Consolidated operating loss decreased $143.1 million, or 95%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to impairment expense of goodwill and long-lived assets in 2020. Interest Expense, net. Net interest expense decreased by $2.7 million, or 28%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily related to lower average debt levels and lower interest rates on term loan and revolving credit facility borrowings during 2021 compared to 2020. Other Income. Consolidated other income decreased $7.0 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The six months ended June 30, 2021 included $3.5 million related to proceeds from the CEWS and a higher gain on the sale of assets primarily related to the sale of a manufacturing facility and mobile assets in Canada. The six months ended June 30, 2020 included $4.7 million of other income associated with the settlement of a representations and warranties claim related to the Noralta acquisition, $6.2 million of other income related to proceeds from the CEWS and a gain on sale of assets related to unutilized lodge assets in Canada. Income Tax (Expense) Benefit. Our income tax expense for the six months ended June 30, 2021 totaled $0.6 million, or (6.6)% of pretax loss, compared to an income tax benefit of $8.7 million, or 5.9% of pretax loss, for the six months ended June 30, 2020. Our effective tax rate for both the six months ended June 30, 2021 and June 30, 2020 was impacted by considering Canada and the U.S. loss jurisdictions that were removed from the annual effective tax rate computation for purposes of computing the interim tax provision. Additionally, our effective tax rate for the six months ended June 30, 2020 was impacted by a deferred tax benefit of $9.6 million offset by an increase of $0.7 million in the valuation allowance in Canada. Other Comprehensive Loss. Other comprehensive loss decreased $16.0 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily as a result of foreign currency translation adjustments due to 30 changes in the Canadian and Australian dollar exchange rates compared to the U.S. dollar. The Canadian dollar exchange rate compared to the U.S. dollar increased 3% in the six months ended June 30, 2021 compared to a 5% decrease in the six months ended June 30, 2020. The Australian dollar exchange rate compared to the U.S. dollar decreased 3% in the six months ended June 30, 2021 compared to a 2% decrease in the six months ended June 30, 2020. Segment Results of Operations – Canadian Segment Six Months Ended June 30, 2021 2020 Change Revenues ($ in thousands) Accommodation revenue (1) $ 116,289 $ 106,270 $ 10,019 Mobile facility rental revenue (2) 19,165 8,580 10,585 Food service and other services revenue (3) 9,712 17,484 (7,772) Total revenues $ 145,166 $ 132,334 $ 12,832 Cost of sales and services ($ in thousands) Accommodation cost $ 83,328 $ 76,653 $ 6,675 Mobile facility rental cost 12,418 8,542 3,876 Food service and other services cost 8,576 16,178 (7,602) Indirect other costs 4,905 5,364 (459) Total cost of sales and services $ 109,227 $ 106,737 $ 2,490 Gross margin as a % of revenues 24.8 % 19.3 % 5.4 % Average daily rate for lodges (4) $ 97 $ 94 $ 3 Total billed rooms for lodges (5) 1,203,390 1,118,220 85,170 Average Canadian dollar to U.S. dollar $ 0.802 $ 0.733 $ 0.069 (1) Includes revenues related to lodge rooms and hospitality services for owned rooms for the periods presented. (2) Includes revenues related to mobile assets for the periods presented. (3) Includes revenues related to food services, laundry and water and wastewater treatment services for the periods presented. (4) Average daily rate is based on billed rooms and accommodation revenue. (5) Billed rooms represents total billed days for owned assets for the periods presented. Our Canadian segment reported revenues in the six months ended June 30, 2021 that were $12.8 million, or 10%, higher than the six months ended June 30, 2020. The strengthening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 9% in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 resulted in a $13.3 million period-over-period increase in revenues. Excluding the impact of the stronger Canadian exchange rate, revenue remained relatively flat; however, it was positively impacted by higher billed rooms at our oil sands lodges related to turnaround activities by a number of customers and by increased mobile asset activity from a pipeline project. Partially offsetting these increases were reduced billed rooms at our Sitka Lodge related to the COVID-19 pandemic and the British Columbia health order and reduced food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required. Our Canadian segment cost of sales and services increased $2.5 million, or 2%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The strengthening of the average exchange rate for the Canadian dollar relative to the U.S. dollar by 9% in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 resulted in a $9.6 million period-over-period increase in cost of sales and services. Excluding the impact of the stronger Canadian exchange rate, the decreased cost of sales and services was driven by reduced food services activity, as an overflow site supporting a LNG-related project in 2020 is no longer required and reduced activity at our Sitka Lodge related to the COVID-19 pandemic and British Columbia health order. Partially offsetting these decreases were increased mobile asset activity from a pipeline project and increased activity at our oil sands lodges related to turnaround activities by a number of customers. 31 Our Canadian segment gross margin as a percentage of revenues increased from 19.3% in the six months ended June 30, 2020 to 24.8% in the six months ended June 30, 2021. This was primarily driven by increased mobile asset activity and related operating efficiencies. Accommodation gross margins were maintained at 28% with an increase in margins at our oil sands lodges related to turnaround activities by a number of customers and related operating efficiencies at these higher levels, offset by a reduction in margins at our Sitka Lodge related to reduced operating efficiencies at the lower occupancy levels experienced due to the COVID-19 pandemic and the British Columbia health order. Segment Results of Operations – Australian Segment Six Months Ended June 30, 2021 2020 Change Revenues ($ in thousands) Accommodation revenue (1) $ 71,455 $ 67,518 $ 3,937 Food service and other services revenue (2) 52,201 $ 38,666 $ 13,535 Total revenues $ 123,656 $ 106,184 $ 17,472 Cost of sales and services ($ in thousands) Accommodation cost $ 35,187 $ 30,264 $ 4,923 Food service and other services cost 49,451 32,466 16,985 Indirect other cost 3,160 1,736 1,424 Total cost of sales and services $ 87,798 $ 64,466 $ 23,332 Gross margin as a % of revenues 29.0 % 39.3 % (10.3) % Average daily rate for villages (3) $ 80 $ 69 $ 11 Total billed rooms for villages (4) 890,964 974,232 (83,268) Australian dollar to U.S. dollar $ 0.772 $ 0.658 $ 0.114 (1) Includes revenues related to village rooms and hospitality services for owned rooms for the periods presented. (2) Includes revenues related to food services and other services, including facilities management for the periods presented. (3) Average daily rate is based on billed rooms and accommodation revenue. (4) Billed rooms represent total billed days for owned assets for the periods presented. Our Australian segment reported revenues in the six months ended June 30, 2021 that were $17.5 million, or 17%, higher than the six months ended June 30, 2020. The strengthening of the average exchange rate for Australian dollars relative to the U.S. dollar by 17% in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 resulted in a $18.3 million period-over-period increase in revenues. Accordingly, the increase in the average daily rate is entirely attributable to the strengthening of the Australia dollar. Excluding the impact of the stronger Australian exchange rate, the Australian segment experienced a 1% decrease in revenues largely due to decreased activity at our Bowen Basin villages and Western Australia villages, partially offset by increased occupancy at our integrated services villages. Our Australian segment cost of sales and services increased $23.3 million, or 36%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The strengthening of the average exchange rate for Australian dollars relative to the U.S. dollar by 17% in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 resulted in a $13.0 million period-over-period increase in cost of sales and services. Excluding the impact of the stronger Australian exchange rate, the increase in cost of sales and services was largely driven by increased occupancy at our integrated services villages and increased costs of temporary labor due to ongoing labor shortages. Our Australian segment gross margin as a percentage of revenues decreased to 29% in the six months ended June 30, 2021 from 39.3% in the six months ended June 30, 2020. This was primarily driven by our integrated services business, which has a service-only business model, and therefore results in lower overall gross margins than the accommodation business. Reduced occupancy at the Bowen Basin villages and Western Australia villages has also impacted our Australian segment gross margin. Segment gross margin has also been negatively impacted by increased staff costs as a result of a hospitality labor shortage in Australia which has been exacerbated by state and international border closures due to COVID-19. State and 32 international border closures have affected the number of staff available which has subsequently led to an increased reliance on more expensive temporary labor hire resources and has placed upward pressure on wages for permanent staff as competitors compete for a small pool of labor. Segment Results of Operations – U.S. Segment Six Months Ended June 30, 2021 2020 Change Revenues ($ in thousands) $ 10,784 $ 14,976 $ (4,192) Cost of sales and services ($ in thousands) $ 10,787 $ 15,243 $ (4,456) Gross margin as a % of revenues 0.0 % (1.8) % 1.8 % Our U.S. segment reported revenues in the six months ended June 30, 2021 that were $4.2 million, or 28%, lower than the six months ended June 30, 2020. This decrease was due to reduced U.S. drilling activity affecting our wellsite business and reduced activity in our offshore fabrication business as a project was completed in the first half of 2020 that did not recur to the same extent in 2021. These decreases were partially offset by increased activity at our Acadian Acres lodge related to a client’s turnaround activity. Our U.S. segment cost of sales and services decreased $4.5 million, or 29%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020. This decrease was due to reduced U.S. drilling activity affecting our wellsite business, reduced activity in our offshore fabrication business as a project was completed in the first half of 2020 that did not recur to the same extent in 2021 and reduced costs at our West Permian lodge under a new customer contract. Our U.S. segment gross margin as a percentage of revenues increased 1.8% from the six months ended June 30, 2020 to the six months ended June 30, 2021, primarily due to improved margins at our West Permian lodge under a new customer contract and in our offshore business from product sales, partially offset by reduced operating efficiencies at lower activity levels in our wellsite business. Liquidity and Capital Resources Our primary liquidity needs are to fund capital expenditures, which in the past have included expanding and improving our hospitality services, developing new lodges and villages, purchasing or leasing land, and for general working capital needs. In addition, capital has been used to repay debt and fund strategic business acquisitions. Historically, our primary sources of funds have been available cash, cash flow from operations, borrowings under our Credit Agreement and proceeds from equity issuances. In the future, we may seek to access the debt and equity capital markets from time to time to raise additional capital, increase liquidity, fund acquisitions, refinance debt or retire preferred shares. The following table summarizes our consolidated liquidity position as of June 30, 2021 and December 31, 2020 (in thousands): June 30, 2021 December 31, 2020 Lender commitments (1) $ 167,300 $ 167,300 Borrowings against revolving credit capacity (52,197) (63,556) Outstanding letters of credit (2,982) (4,487) Unused availability 112,121 99,257 Cash and cash equivalents 4,414 6,155 Total available liquidity $ 116,535 $ 105,412 (1) As of June 30, 2021, we had one bank guarantee facility totaling A$1.0 million. As of December 31, 2020, we had two bank guarantee facilities totaling $3.0 million. We had bank guarantees of A$0.8 million outstanding under the facilities as of both June 30, 2021 and December 31, 2020. Cash totaling $29.4 million was provided by operations during the six months ended June 30, 2021, compared to $45.3 million provided by operations during the six months ended June 30, 2020. During the six months ended June 30, 2021 and 33 2020, $13.8 million was used in working capital and $2.9 million was provided by working capital, respectively. The decrease in cash provided by working capital in 2021 compared to 2020 is largely due to increased accounts receivable balances in Canada. Cash was provided by investing activities during the six months ended June 30, 2021 in the amount of $0.5 million, compared to cash provided by investing activities during the six months ended June 30, 2020 in the amount of $2.7 million. The decrease in cash provided by investing activities was primarily due to $4.7 million of other income associated with the settlement of a representations and warranties claim related to the Noralta acquisition and lower capital expenditures during the six months ended June 30, 2020, partially offset by higher proceeds from the sale of our manufacturing facility and mobile assets in Canada during the six months ended June 30, 2021. Capital expenditures totaled $6.5 million and $3.8 million during the six months ended June 30, 2021 and 2020, respectively. We expect our capital expenditures for 2021, exclusive of any business acquisitions or any growth capital expenditures, to be approximately $20 million, which excludes any unannounced and uncommitted projects, the spending for which is contingent on obtaining customer contracts. Whether planned expenditures will actually be spent in 2021 depends on industry conditions, project approvals and schedules, customer room commitments and project and construction timing. We expect to fund these capital expenditures with available cash, cash flow from operations and revolving credit borrowings under our Credit Agreement. The foregoing capital expenditure forecast does not include any funds for strategic acquisitions, which we could pursue should the transaction economics be attractive enough to us compared to the current capital allocation priorities of debt reduction. We continue to monitor the COVID-19 global pandemic and the responses thereto, the global economy, the prices of and demand for crude oil, met coal and iron ore and the resultant impact on the capital spending plans of our customers in order to plan our business activities, and we may adjust our capital expenditure plans in the future. Net cash of $31.1 million was used in financing activities during the six months ended June 30, 2021 primarily due to net repayments under our revolving credit facilities of $12.1 million, repayments of term loan borrowings of $17.9 million and $1.1 million used to settle tax obligations on vested shares under our share-based compensation plans. Net cash of $43.6 million was used in financing activities during the six months ended June 30, 2020 primarily due to net repayments under our revolving credit facilities of $25.6 million, repayments of term loan borrowings of $16.5 million and $1.5 million used to settle tax obligations on vested shares under our share-based compensation plans. The following table summarizes the changes in debt outstanding during the six months ended June 30, 2021 (in thousands): Balance at December 31, 2020 $ 251,086 Borrowings under revolving credit facilities 117,976 Repayments of borrowings under revolving credit facilities (130,080) Repayments of term loans (17,874) Translation 5,725 Balance at June 30, 2021 $ 226,833 We believe that cash on hand and cash flow from operations will be sufficient to meet our anticipated liquidity needs in the coming 12 months. If our plans or assumptions change, including as a result of the impact of COVID-19 or the decline in the price of and demand for oil, or are inaccurate, or if we make acquisitions, we may need to raise additional capital. Acquisitions have been, and our management believes acquisitions will continue to be, an element of our long-term business strategy. The timing, size or success of any acquisition effort and the associated potential capital commitments are unpredictable and uncertain. We may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances or may issue equity directly to the sellers. Our ability to obtain capital for additional projects to implement our growth strategy over the longer term will depend on our future operating performance, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets and other factors, many of which are beyond our control. In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to shareholders. 34 Credit Agreement As of June 30, 2021, our Credit Agreement (as then amended to date, the Credit Agreement) provided for: (i) a $167.3 million revolving credit facility scheduled to mature on May 30, 2023, allocated as follows: (A) a $10.0 million senior secured revolving credit facility in favor of certain of our U.S. subsidiaries, as borrowers; (B) a $122.3 million senior secured revolving credit facility in favor of Civeo and certain of our Canadian subsidiaries, as borrowers; and (C) a $35.0 million senior secured revolving credit facility in favor of one of our Australian subsidiaries, as borrower; and (ii) a $194.8 million term loan facility scheduled to mature on May 30, 2023 for certain lenders in favor of Civeo. As of June 30, 2021, we had outstanding letters of credit of $0.9 million under the U.S. facility, zero under the Australian facility and $2.1 million under the Canadian facility. As of June 30, 2021, we had one bank guarantee facility totaling A$1.0 million. We had bank guarantees of A$0.8 million outstanding under the facility as of June 30, 2021. See Note 8 – Debt to the notes to the unaudited consolidated financial statements included in Item 1 of this quarterly report for further discussion. Dividends The declaration and amount of all potential future dividends will be at the discretion of our Board of Directors and will depend upon many factors, including our financial condition, results of operations, cash flows, prospects, industry conditions, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors the Board of Directors deems relevant. In addition, our ability to pay cash dividends on common or preferred shares is limited by covenants in the Credit Agreement. Future agreements may also limit our ability to pay dividends, and we may incur incremental taxes if we are required to repatriate foreign earnings to pay such dividends. If we elect to pay dividends in the future, the amount per share of our dividend payments may be changed, or dividends may be suspended, without advance notice. The likelihood that dividends will be reduced or suspended is increased during periods of market weakness. There can be no assurance that we will pay a dividend in the future. The preferred shares we issued in the Noralta acquisition are entitled to receive a 2% annual dividend on the liquidation preference (initially $10,000 per share), paid quarterly in cash or, at our option, by increasing the preferred shares’ liquidation preference, or any combination thereof. Quarterly dividends were paid in-kind on June 30, 2021, thereby increasing the liquidation preference to $10,669 per share as of June 30, 2021. We currently expect to pay dividends on the preferred shares for the foreseeable future through an increase in liquidation preference rather than cash. Off-Balance Sheet Arrangements As of June 30, 2021, we had no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. Contractual Obligations For additional information about our contractual obligations, refer to “Liquidity and Capital Resources—Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2020. As of June 30, 2021, except for net repayments under our revolving credit facilities, there were no material changes to the disclosure regarding our contractual obligations made in our Annual Report on Form 10-K for the year ended December 31, 2020. Critical Accounting Policies For a discussion of the critical accounting policies and estimates that we use in the preparation of our consolidated financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020. These estimates require significant judgments, assumptions and estimates. We have discussed the development, selection and disclosure of these critical accounting policies and estimates with the audit committee of our Board of Directors. There have been no material changes to the judgments, assumptions and estimates upon which our critical accounting estimates are based. 35